Europe's economy said to be on mend

The euro promptly hit another record against the dollar of $1.2155, breaking the old record of $1.2127 set Wednesday before falling back.

US Treasury Secretary John Snow insisted that Washington remains committed to a strong dollar, but refused to say whether the United States would intervene in currency markets to prop up the dollar.

Trichet's statement about growth, at a news conference after the bank left interest rates unchanged for the sixth consecutive month, suggested the bank thinks the economy no longer needs the stimulus lower rates would give -- despite widespread concern the higher euro will hurt growth by undermining exports.

"The latest data releases confirmed that economic activity in the euro area has picked up," Trichet said.

The economy in the 12 countries using the euro currency grew 0.4 percent in the third quarter, breaking out of months of stagnation. It shrank slightly in the second quarter and failed to grow in the two quarters before that.

Trichet credited a stronger global economy that was increasing demand for European goods, saying that the expansion "reflects the strong momentum of the world economy, which we assume will continue next year."

Hesitant European consumers should begin to spend next year as well, he said, saying the euro's rise should help by making imported goods cheaper and curbing inflation.

The rampaging euro -- up 15.5 percent against the dollar this year -- has caused concern among political and business leaders because it could hurt Europe's exports by making them more expensive compared to those of foreign competitors. That in turn could hurt growth.

But Trichet resolutely dodged journalists' questions about the euro's exchange rate, including one asking what euro level the bank considered dangerous for the economy. "I will not comment on day-to-day or week-to-week currency developments," he said.

Some analysts have said the bank might intervene in currency markets if the euro continues a rapid climb by selling euros to slow the currency's rise to a more orderly pace.

Analyst Armin Mekelburg at HVB Group in Munich said he didn't see the euro rising beyond $1.23 in the short term because of the likelihood the ECB would step in. "A very rapid move toward $1.25 would seriously challenge the ECB," Mekelburg said.

The euro has risen amid concerns about the effect of the US budget and trade deficits, which can undermine a country's currency. As traders have sold dollars, the dollar's fall has gained momentum of its own, sometimes exaggerated by thinner trading volumes that magnify price swings.

Other factors include fears about the fallout on the US economy from the troubled occupation of Iraq and higher interest rates in the euro zone.